Reserve Bank of India cuts repo rate, CRR by 25 bps each

The Reserve Bank of India ( RBI), central banking institution of India, has slashed the key lending rate – repo rate by 25 bps to 7.75%. The reverse repo rate will also be adjusted to 6.75% from 7%. It has also announced a cut in Cash Reserve Ratio (CRR) by 25 bps to 4%, effective February 9, 2013.

The rate cut, first in nine months, is likely to encourage banks to reduce their lending rates. The CRR cut is expected to infuse Rs 18,000 crore of liquidity into the banking system.

The Reserve Bank has revised the inflation target for March 2013 to 6.8% versus 7.5% earlier.